Lecture Accounting principles (8th edition) – Chapter 10: Plant assets, natural resources, and intangible assets
Bạn đang xem bản rút gọn của tài liệu. Xem và tải ngay bản đầy đủ của tài liệu tại đây (607.78 KB, 61 trang )
Chapter
10-1
CHAPTER 10
PLANT ASSETS,
NATURAL
RESOURCES, AND
INTANGIBLE
ASSETS
Accounting Principles, Eighth Edition
Chapter
10-2
Study Objectives
Study Objectives
1.
Describe how the cost principle applies to plant assets.
2.
Explain the concept of depreciation.
3.
Compute periodic depreciation using different methods.
4.
Describe the procedure for revising periodic depreciation.
5.
Distinguish between revenue and capital expenditures, and explain the entries
for each.
6.
Explain how to account for the disposal of a plant asset.
7.
Compute periodic depletion of natural resources.
8.
Explain the basic issues related to accounting for intangible assets.
9.
Indicate how plant assets, natural resources, and intangible assets are reported.
Chapter
10-3
Plant Assets, Natural Resources, and Intangible
Plant Assets, Natural Resources, and Intangible
Assets
Assets
Plant
PlantAssets
Assets
Determining
the cost of
plant assets
Depreciation
Expenditures
during useful
life
Plant asset
disposals
Chapter
10-4
Natural
Natural
Resources
Resources
Depletion
Intangible
Intangible
Assets
Assets
Accounting for
intangibles
Research and
development
costs
Statement
Statement
Presentation
Presentation
and
andAnalysis
Analysis
Presentation
Analysis
Section 1 –
Section 1 – Plant Assets
Plant Assets
Plant assets include land, land improvements, buildings, and
equipment (machinery, furniture, tools).
Major characteristics include:
“Used in operations” and not for resale.
Longterm in nature and usually depreciated.
Possess physical substance.
Referred to as property, plant, and equipment; plant and equipment; and
fixed assets.
Chapter
10-5
Determining the Cost of Plant Assets
Determining the Cost of Plant Assets
Land
Includes all costs to acquire land and ready it for use.
Costs typically include:
(1) the purchase price;
(2) closing costs, such as title and attorney’s fees;
(3) real estate brokers’ commissions;
(4) costs of grading, filling, draining, and clearing;
(5) assumption of any liens, mortgages, or encumbrances on the
property.
Chapter
10-6
LO 1 Describe how the cost principle applies to plant assets.
Determining the Cost of Plant Assets
Determining the Cost of Plant Assets
E103 On March 1, 2008, Penner Company acquired real estate on which it
E103
planned to construct a small office building. The company paid $80,000 in cash.
An old warehouse on the property was razed at a cost of $8,600; the salvaged
materials were sold for $1,700. Additional expenditures before construction began
included $1,100 attorney’s fee for work concerning the land purchase, $5,000 real
estate broker’s fee, $7,800 architect’s fee, and $14,000 to put in driveways and a
parking lot.
Instructions
Determine amount to be reported as the cost of the land. For each cost not used,
indicate the account debited.
Chapter
10-7
LO 1 Describe how the cost principle applies to plant assets.
Determining the Cost of Plant Assets
Determining the Cost of Plant Assets
Land Improvements
Includes all expenditures necessary to make the improvements ready for
their intended use.
Examples are driveways, parking lots, fences, landscaping, and
underground sprinklers.
Limited useful lives.
Expense (depreciate) the cost of land improvements over their
useful lives.
Chapter
10-8
LO 1 Describe how the cost principle applies to plant assets.
Determining the Cost of Plant Assets
Determining the Cost of Plant Assets
Buildings
Includes all costs related directly to purchase or construction.
Purchase costs:
Purchase price, closing costs (attorney’s fees, title insurance, etc.) and
real estate broker’s commission.
Remodeling and replacing or repairing the roof, floors, electrical wiring,
and plumbing.
Construction costs:
Chapter
10-9
Contract price plus payments for architects’ fees, building permits, and
excavation costs.
LO 1 Describe how the cost principle applies to plant assets.
Determining the Cost of Plant Assets
Determining the Cost of Plant Assets
E103 Determine amount to be reported as the cost of the land.
E103
Land
Company paid $80,000 in cash.
$80,000
Old warehouse razed at a cost of $8,600
Salvaged materials were sold for $1,700.
8,600
1,700
Expenditures before construction began:
$1,100 attorney’s fee for work on land purchase.
1,100
$5,000 real estate broker’s fee.
5,000
$7,800 architect’s fee.
Building
0
$14,000 for driveways and parking lot.
Land Improvements
Chapter
10-10
0
Total
$93,000
LO 1 Describe how the cost principle applies to plant assets.
Determining the Cost of Plant Assets
Determining the Cost of Plant Assets
Equipment
Include all costs incurred in acquiring the equipment and preparing it
for use.
Costs typically include:
purchase price,
sales taxes,
freight and handling charges,
insurance on the equipment while in transit,
assembling and installation costs, and
costs of conducting trial runs.
Chapter
10-11
LO 1 Describe how the cost principle applies to plant assets.
Depreciation
Depreciation
Depreciation is the process of allocating the cost of tangible assets to
expense in a systematic and rational manner to those periods expected to
benefit from the use of the asset.
Process of cost allocation, not asset valuation.
Applies to land improvements, buildings, and equipment, not
land.
Depreciable, because the revenueproducing ability of asset will
decline over the asset’s useful life.
Chapter
10-12
LO 2 Explain the concept of depreciation.
Depreciation
Depreciation
Factors in Computing Depreciation
Cost
Chapter
10-13
Useful Life
Illustration 106
Salvage Value
LO 2 Explain the concept of depreciation.
Depreciation
Depreciation
Depreciation Methods
Objective is to select the method that best measures an asset’s
contribution to revenue over its useful life. Examples include:
(1) Straightline method.
(2) UnitsofActivity method.
(3) Decliningbalance method.
Illustration 108 Use of
depreciation methods in 600
large U.S. companies
Chapter
10-14
LO 3 Compute periodic depreciation using different methods.
Depreciation
Depreciation
Exercise (Depreciation Computations—Three Methods)
Parish Corporation purchased a new machine for its assembly process on January
2, 2008. The cost of this machine was $117,900. The company estimated that the
machine would have a salvage value of $12,900 at the end of its service life. Its
life is estimated at 5 years and its working hours are estimated at 1,000 hours.
Yearend is December 31.
Instructions: Compute the depreciation expense under the following methods.
(a) StraightLine.
(b) UnitsofActivity.
(c) Declining Balance.
Chapter
10-15
LO 3 Compute periodic depreciation using different methods.
Depreciation
Depreciation
StraightLine
Expense is same amount for each year.
Depreciable cost is cost of the asset less its salvage value.
Straightline method predominates in practice.
Chapter
10-16
LO 3 Compute periodic depreciation using different methods.
Depreciation
Depreciation
Exercise (StraightLine Method)
Ye ar
De pr e c ia b le
Co s t
2008
$ 1 0 5 , 0 0 0
/
5
=
$ 2 1 , 0 0 0
$ 2 1 , 0 0 0
2009
1 0 5 , 0 0 0
/
5
=
2 1 , 0 0 0
4 2 , 0 0 0
2010
1 0 5 , 0 0 0
/
5
=
2 1 , 0 0 0
6 3 , 0 0 0
2011
1 0 5 , 0 0 0
/
5
=
2 1 , 0 0 0
8 4 , 0 0 0
2012
1 0 5 , 0 0 0
/
5
=
2 1 , 0 0 0
105, 000
Ye ar s
A nnua l
Ex pe ns e
A c c um .
De pr e c .
$ 1 0 5 , 0 0 0
2008 Journal Entry
Depreciation expense
21,000
Accumulated depreciation
Chapter
10-17
21,000
LO 3 Compute periodic depreciation using different methods.
Depreciation
Depreciation
UnitsofActivity
Expense varies based on units of activity.
Depreciable cost is cost less salvage value.
Companies estimate total units of activity to calculate
depreciation cost per unit.
Chapter
10-18
LO 3 Compute periodic depreciation using different methods.
Depreciation
Depreciation
Exercise (UnitsofActivity Method)
($105,000 / 1,000 hours = $105 per hour)
Ye a r
Ho ur s
Us e d
Ra t e pe r
Ho ur
2008
200
x
$ 105
=
$ 2 1 , 0 0 0
$ 2 1 , 0 0 0
2009
150
x
105
=
1 5 , 7 5 0
3 6 , 7 5 0
2010
250
x
105
=
2 6 , 2 5 0
6 3 , 0 0 0
2011
300
x
105
=
3 1 , 5 0 0
9 4 , 5 0 0
2012
100
x
105
=
1 0 , 5 0 0
1 0 5 , 0 0 0
1, 000
A c c um .
De pr e c .
$ 1 0 5 , 0 0 0
2008 Journal Entry
Depreciation expense
Chapter
10-19
A nnua l
Ex pe ns e
21,000
Accumulated depreciation
21,000
LO 3 Compute periodic depreciation using different methods.
Depreciation
Depreciation
DecliningBalance
Decreasing annual depreciation expense over the asset’s useful life.
Decliningbalance rate is double the straightline rate.
Rate applied to book value (cost less accumulated depreciation.
Chapter
10-20
LO 3 Compute periodic depreciation using different methods.
Depreciation
Depreciation
Exercise (DecliningBalance Method)
De c lining
Ba la nc e
Ra t e
Ye ar
Be g inning
Bo o k va lue
A nnua l
Ex pe ns e
A c c um .
De pr e c .
2008
$ 1 1 7 , 9 0 0
x
40%
=
$ 4 7 , 1 6 0
$ 4 7 , 1 6 0
2009
7 0 , 7 4 0
x
40%
=
2 8 , 2 9 6
7 5 , 4 5 6
2010
4 2 , 4 4 4
x
40%
=
1 6 , 9 7 8
9 2 , 4 3 4
2011
2 5 , 4 6 6
x
40%
=
1 0 , 1 8 6
102, 620
2012
1 5 , 2 8 0
x
40%
=
2 , 3 8 0
105, 000
$ 1 0 5 , 0 0 0
Depreciation expense
2008 Journal Entry
47,160
Accumulated depreciation
Chapter
10-21
Plug
47,160
LO 3 Compute periodic depreciation using different methods.
Depreciation
Depreciation
Comparison of Depreciation Methods
Chapter
10-22
Ye ar
SL
DB
A c t ivit y
2008
2 1 , 0 0 0
4 7 , 1 6 0
2 1 , 0 0 0
2009
2 1 , 0 0 0
2 8 , 2 9 6
Comparison of Depreciation Methods
1 5 , 7 5 0
2010
2 1 , 0 0 0
1 6 , 9 7 8
2 6 , 2 5 0
2011
2 1 , 0 0 0
1 0 , 1 8 6
3 1 , 5 0 0
2012
2 1 , 0 0 0
2 , 3 8 0
1 0 , 5 0 0
1 0 5 , 0 0 0
1 0 5 , 0 0 0
1 0 5 , 0 0 0
LO 3 Compute periodic depreciation using different methods.
Depreciation for Partial Year
Depreciation for Partial Year
The following additional slides are included to illustrate
the calculation of partialyear depreciation expense.
The amounts are consistent with the previous slides
illustrating the calculation of depreciation expense.
Chapter
10-23
LO 3 Compute periodic depreciation using different methods.
Depreciation for Partial Year
Depreciation for Partial Year
Exercise (Depreciation Computations—Three Methods)
Parish Corporation purchased a new machine for its assembly process on October 1,
2008. The cost of this machine was $117,900. The company estimated that the
machine would have a salvage value of $12,900 at the end of its service life. Its
life is estimated at 5 years and its working hours are estimated at 1,000 hours.
During 2008, the machine was used 30 hours. Yearend is December 31.
Instructions: Compute the depreciation expense under the following methods.
(a) StraightLine.
(b) UnitsofActivity.
(c) DecliningBalance.
Chapter
10-24
LO 3 Compute periodic depreciation using different methods.
Depreciation for Partial Year
Depreciation for Partial Year
Exercise (Straightline Method)
A nnua l
Ex pe ns e
A c c um .
De pr e c .
$ 5 , 2 5 0
$ 5 , 2 5 0
Ye ar
De pr e c ia b le
Ba s e
2008
$ 1 0 5 , 0 0 0
/
5
=
$ 2 1 , 0 0 0
2009
1 0 5 , 0 0 0
/
5
=
2 1 , 0 0 0
2 1 , 0 0 0
2 6 , 2 5 0
2010
1 0 5 , 0 0 0
/
5
=
2 1 , 0 0 0
2 1 , 0 0 0
4 7 , 2 5 0
2011
1 0 5 , 0 0 0
/
5
=
2 1 , 0 0 0
2 1 , 0 0 0
6 8 , 2 5 0
2012
1 0 5 , 0 0 0
/
5
=
2 1 , 0 0 0
2 1 , 0 0 0
8 9 , 2 5 0
2013
1 0 5 , 0 0 0
/
5
=
2 1 , 0 0 0
1 5 , 7 5 0
1 0 5 , 0 0 0
Ye ar s
Pa r t ia l
Ye ar
Cur r e nt
Ye ar
Ex pe ns e
x
x
3/12
9/12
=
=
$ 1 0 5 , 0 0 0
J our na l e nt r y :
2008
De p r e c ia t ion e x p e ns e
5 , 2 5 0
A c c um ult a t e d d e p r e c ia t ion
Chapter
10-25
5 , 2 5 0
LO 3 Compute periodic depreciation using different methods.
